Opinion on the legal basis of the proposal for a regulation of the European Parliament and of the Council on methane emissions reduction in the energy sector and amending Regulation (EU) 2019/942

24.1.2024

Mr Pascal Canfin

Chair

Committee on the Environment, Public Health and Food Safety

BRUSSELS

Mr Cristian Silviu Bușoi

Chair

Committee on Industry, Research and Energy

BRUSSELS

Subject: Opinion on the legal basis of the proposal for a regulation of the European Parliament and of the Council on methane emissions reduction in the energy sector and amending Regulation (EU) 2019/942 (COM(2021)0805 – C90467/2021 – 2021/0423(COD))

Dear Chairs,

By letter of 6 December 2023, you requested the Committee on Legal Affairs (JURI), pursuant to Rule 40(2) of the Rules of Procedure, to provide an opinion on appropriateness of choosing Article 192(1) of the Treaty on the Functioning of the European Union (TFEU) as the sole legal basis for the proposal for a regulation on methane emissions reduction in the energy sector and amending Regulation (EU) 2019/942 (2021/0423(COD)) (hereinafter “the proposal”).

JURI considered the above question at its meeting of 24 January 2024.

I - Background

The Committee on the Environment, Public Health and Food Safety (ENVI) and Committee on Industry, Research and Energy (ITRE), acting jointly under Rule 58 of the Rules of Procedure, have been in inter-institutional negotiations on the proposal, the aim of which is to reduce energy sector methane emissions in Europe and in global supply chains.

The Commission initially based the proposal on Article 194(2) TFEU. In their joint report ENVI and ITRE did not amend the legal basis. The Parliament mandate, adopted in plenary on 9 May 2023, also left this element unchanged. However, in its general approach, Council chose Article 192(1) TFEU as the (sole) legal basis. In its view, that legal basis reflects the main purpose of the text, to reduce methane emissions in the energy sector and to participate in the fight against climate change, through mitigation, measurement, reporting and verification obligations.

During inter-institutional negotiations, the change of legal basis has provisionally been agreed by the co-legislators. In view of that and pursuant to Article 40(2) of Parliament’s Rules of Procedure, ENVI and ITRE requested JURI to provide an opinion on the appropriateness of Article 192(1) TFEU as the sole legal basis for the proposal.

II - The relevant Treaty Articles

Title XX of Part three of the Treaty on the Functioning of the European Union, on “Environment” reads, inter alia (emphasis added):

Article 191

(ex Article 174 TEC)

1. Union policy on the environment shall contribute to pursuit of the following objectives:

- preserving, protecting and improving the quality of the environment,

- protecting human health,

- prudent and rational utilisation of natural resources,

- promoting measures at international level to deal with regional or worldwide environmental problems, and in particular combating climate change.

(...)

Article 192

(ex Article 175 TEC)

1. The European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee and the Committee of the Regions, shall decide what action is to be taken by the Union in order to achieve the objectives referred to in Article 191.

2. By way of derogation from the decision-making procedure provided for in paragraph 1 and without prejudice to Article 114, the Council acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament, the Economic and Social Committee and the Committee of the Regions, shall adopt:

(a) provisions primarily of a fiscal nature;

(b) measures affecting:

- town and country planning,

- quantitative management of water resources or affecting, directly or indirectly, the availability of those resources,

- land use, with the exception of waste management;

(c) measures significantly affecting a Member State's choice between different energy sources and the general structure of its energy supply.

The Council, acting unanimously on a proposal from the Commission and after consulting the European Parliament, the Economic and Social Committee and the Committee of the Regions, may make the ordinary legislative procedure applicable to the matters referred to in the first subparagraph.

3. General action programmes setting out priority objectives to be attained shall be adopted by the European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee and the Committee of the Regions.

The measures necessary for the implementation of these programmes shall be adopted under the terms of paragraph 1 or 2, as the case may be.

4. Without prejudice to certain measures adopted by the Union, the Member States shall finance and implement the environment policy.

5. Without prejudice to the principle that the polluter should pay, if a measure based on the provisions of paragraph 1 involves costs deemed disproportionate for the public authorities of a Member State, such measure shall lay down appropriate provisions in the form of:

- temporary derogations, and/or

- financial support from the Cohesion Fund set up pursuant to Article 177.

Title XXI of Part three of the Treaty on the Functioning of the European Union, on “Energy” reads (emphasis added):

Article 194

1. In the context of the establishment and functioning of the internal market and with regard for the need to preserve and improve the environment, Union policy on energy shall aim, in a spirit of solidarity between Member States, to:

(a) ensure the functioning of the energy market;

(b) ensure security of energy supply in the Union;

(c) promote energy efficiency and energy saving and the development of new and renewable forms of energy; and

(d) promote the interconnection of energy networks.

2. Without prejudice to the application of other provisions of the Treaties, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall establish the measures necessary to achieve the objectives in paragraph 1. Such measures shall be adopted after consultation of the Economic and Social Committee and the Committee of the Regions.

Such measures shall not affect a Member State's right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply, without prejudice to Article 192(2)(c).

3. By way of derogation from paragraph 2, the Council, acting in accordance with a special legislative procedure, shall unanimously and after consulting the European Parliament, establish the measures referred to therein when they are primarily of a fiscal nature.

III – CJEU case law on the choice of legal basis

The Court of Justice has traditionally viewed the question of the appropriate legal basis as an issue of constitutional significance, guaranteeing compliance with the principle of conferred powers (Article 5 of the Treaty on European Union) and determining the nature and scope of the Union’s competence.

According to well-established case-law, the legal basis of a Union act does not depend on an institution's conviction as to the objective pursued, but must be determined according to objective criteria amenable to judicial review, including in particular the aim and the content of the measure. The legal basis for an act must be determined having regard to its own aim and content.

If examination of an act reveals that it pursues a twofold purpose or that it has a twofold component and if one of those is identifiable as the main or predominant purpose or component, whereas the other is merely incidental, that measure must be based on a single legal basis, namely that required by the main or predominant purpose or component. Only exceptionally, if it is established that the act simultaneously pursues a number of objectives, inextricably linked, without one being secondary and indirect in relation to the other, may such an act be founded on the various corresponding legal bases. This would however only be possible if the procedures laid down for the respective legal bases are compatible with and do not undermine the right of the European Parliament.

IV – Aim and content of the proposed Regulation

In order to assess the appropriateness of choosing Article 192(1) TFEU over Article 194(2) TFEU as the sole legal basis for the proposal, it is necessary to examine its main aim and content, in the light of the case-law of the Court of Justice on the choice of legal basis.

As regards the aim of the proposal, the explanatory memorandum sets the context by referring to the European Green Deal, which puts the Union on the path to climate neutrality by 2050 through deep decarbonisation of all sectors of the economy. It explains that “[m]ethane is a powerful greenhouse gas, second only to carbon dioxide in its overall contribution to climate change and is responsible for about a third of current climate warming” (emphasis added). It follows on to refer to the Intergovernmental Panel on Climate Change, whose “most recent report underlines the role of methane as one of the main greenhouse gases responsible for climate change”, as well as to Union’s 2030 Climate Target Plan, the impact assessment of which indicates that “in the EU the most cost-effective methane emission savings can be achieved in the energy sector“ (emphasis added). Further on into the explanatory memorandum it is also said that the proposal builds on this Union 2030 Climate Target Plan and its impact assessment.

The explanatory memorandum also states that “[t]he general objective of the Regulation is, in the context of the functioning of the internal market for energy and while ensuring security of supply in the Union, to preserve and improve the environment by reducing methane emissions from fossil energy produced or consumed in the Union” (emphasis added).

This general objective is divided into three specific objectives: (i) improve the accuracy of information on the main sources of methane emissions associated with energy produced and consumed within the Union; (ii) ensure further effective reduction of methane emissions across the energy supply chain in the Union by addressing market failures leading to insufficient mitigation of methane emissions by companies; and (iii) improve the availability of information to provide incentives for the reduction of methane emissions related to fossil energy imported to the Union.

Under the heading “Consistency with existing policy provisions in the policy area” (emphasis added) the explanatory memorandum also refers to a series of instruments in the area of environment, starting with Regulation (EU) 2021/1119 on European Climate Law, the already mentioned Union’s 2030 Target Plan and its impact assessment, the European Green Deal, continuing with Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action, Directive 2010/75/EU on industrial emissions, Regulation (EC) 166/2006 concerning the establishment of a European Pollutant Release and Transfer Register, etc.

The recitals of the Regulation which have been provisionally agreed also reflect this environmental aim, the reduction of methane emissions in order to reach the climate objectives, starting straight in Recital 1: “Methane is second only to carbon dioxide in its overall contribution to climate change and is responsible for approximately a third of current warming. The Intergovernmental Panel on Climate Change (IPCC) published in its Sixth Assessment Report the finding that deep reductions in anthropogenic methane emissions are needed by 2030 to stay below 1,5 ° C.”, and continuing throughout the recitals that follow. Consequently, and as finally expressed in recital 68, the objective of the Regulation proposed is “the accurate measurement, quantification, monitoring, reporting, verification and the reduction of methane emissions in the energy sector”.

In terms of the content of the proposal, the normative part seems to confirm the environmental character of this piece of legislation, since, according to Article1(1) of the proposal as provisionally agreed, the “Regulation lays down rules for the accurate measurement, quantification, monitoring, reporting and verification of methane emissions in the energy sector in the Union, as well as the abatement of those emissions, including through leak detection and repair surveys, repair obligations and restrictions on venting and flaring. This Regulation also lays down rules on tools ensuring transparency of methane emissions” (emphasis added).

It should also be noted that the proposal builds on three pillars of the Commission Communication on Union strategy to reduce methane emissions (COM(2020)633): (a) it imposes measurement, reporting and verification obligations on all sources of methane emissions in Union energy sector components (Articles 12, 20 and 25) under their operations, (b) it imposes obligations to mitigate and monitor methane emissions (Articles 13, 21 and 26), including leak detection and repair (Article 14), ban on venting and routine flaring (Articles 15-17, 22, 23 and 26(2)) and obligation on Member States to develop and implement mitigations plans (Articles 18 and 26), and (c) it puts forward various instruments for improving information on methane emissions and measurement, reporting and verification equivalence relating to imported fossil energy (Articles 10 and 27-29).

V – Analysis

It follows from point IV on the aim and content of the proposal that it is invariably imbued with the objective to reduce methane emissions in the energy sector across the Union due to the impact of these emissions on climate in the context of the climate emergency and the Union’s climate neutrality target. It seems manifestly clear that the predominant purpose of the proposal is to contribute to combating climate change, which is one of the main objectives of environmental policy under Article 191 TFEU.

The only justification the Commission gives for choosing Article 194(2) as the legal basis is that the proposal would ensure the functioning of the energy market under Article 194(1)(a) by harmonising monitoring, reporting and abatement rules on methane, and that it is limited to the energy sector.

It should be pointed out that there is no reference to the functioning of the energy market neither in the recital nor in the Articles of the proposed act.

It is true that the proposal is limited to emissions from the energy sector and that the obligations provided for would have an impact on the operators in that sector. However, it would appear that that would only be an ancillary effect. Although the proposal is limited to energy sector, the fact remains that its main aim is to contribute to the fight against climate change by reducing methane emissions. In other words, the limitation to energy sector is unable to change the centre of gravity of the proposed act and its main environmental objective, which consists in the reduction of methane emissions to fight climate change and to help achieve Union’s climate neutrality target.

Article 192(1) TFEU is the main legal basis for deciding on the action to be taken by the Union in order to achieve the objectives referred to in Article 191 TFEU, i.e. preserving, protecting and improving the quality of the environment, protecting human health, prudent and rational utilisation of natural resources, promoting measures at international level to deal with regional or worldwide environmental problems, and in particular combating climate change.

The proposal clearly has an aim and content that pursue the objective of combating climate change. Consequently, the correct sole legal basis of the proposal would be Article 192(1) TFEU as both its aim and content relate primarily to Union environmental policy objectives.

There are other legislative acts pursuing climate objective but are limited to or affect only certain specific sector, without recourse to that sector’s legal basis. The already mentioned Directive 2010/75/EU on industrial emissions is one example, based solely on Article 192(1) TFEU. Regulation (EU) 2015/757 on CO2 emissions in the maritime sector is another example; although it only relates to the maritime sector, it was not adopted using the transport legal basis but was based on Article 192(1) TFEU. A recent Directive (EU) 2023/959 is a further example; it extended the scope of Emissions Trading System to maritime transport but it is considered an environmental measure based solely on Article 192(1) TFEU.

For the sake of completeness, it is nevertheless accurate to note that the proposal also amends Regulation (EU) 2019/942, an energy policy instrument based on Article 194(2) TFEU, and to address the question whether that Article should be maintained as a second legal basis because of that amendment. The case-law outlined in point III of this note highlights that an act can be based on multiple legal basis only exceptionally, when its aims are inextricably linked. However, the amendment of Regulation (EU) 2019/942 is ancillary and does not require a specific energy legal basis.

VI – Conclusion and recommendation

At its meeting of 24 January 2024 the Committee on Legal Affairs unanimously decided to recommend to the Committee on the Environment, Public Health and Food Safety and the Committee on Industry, Research and Energy that Article 192(1) TFEU is the appropriate legal basis for the proposal.

Yours sincerely,

Adrián Vázquez Lázara